Analysis of the 2007-08 Budget Bill: Transportation

The California Highway Patrol’s (CHP’s) core mission is to ensure safety and enforce traffic laws on state highways and county roads in unincorporated areas. The department also promotes traffic safety by inspecting commercial vehicles, as well as inspecting and certifying school buses, ambulances, and other specialized vehicles. The CHP carries out a variety of other mandated tasks related to law enforcement, including investigating vehicular theft and providing backup to local law enforcement in criminal matters. In addition, the department provides protective services and security for state employees and property. Since September 11, 2001, CHP has played a major role in the state’s enhanced antiterror activities.

The CHP’s overall level of staffing is about 10,900 positions. The department is comprised of uniformed (sworn) and nonuniformed (nonsworn) personnel, with uniformed personnel accounting for approximately 7,600 positions, or 70 percent, of total staff.

The budget proposes $1.8 billion in support for CHP in 2007-08, about $150 million (9 percent) above estimated current-year expenditures. The increase is primarily related to the second-year funding ($51 million) of a multiyear radio system upgrade, a pro rata adjustment for administrative services provided by other agencies ($26 million), and a staffing augmentation for patrol services ($18 million).

Most of CHP’s budget is funded from the Motor Vehicle Account (MVA), which derives its revenues primarily from vehicle registration and driver license fees. For 2007-08, MVA funds would comprise nearly 90 percent of CHP’s support costs.

The budget proposes to increase the number of truck terminal inspections conducted by the California Highway Patrol (CHP) in the Biennial Inspection of Terminals program. The budget also proposes a new fee structure to make the program self-financed. While we think that increased inspections and the move toward self-financing make sense, we find the proposed fee structure is flawed, the projected revenues from it are overstated, and many of the positions are not justified on a workload basis. We recommend the administration develop a more rational fee proposal. Also, we recommend 32 of the 71.5 positions requested be rejected for a savings of $3.3 million. Finally, we recommend CHP advise the Legislature on operational efficiencies it can implement to reduce the amount of time it takes to complete a terminal inspection. (Reduce Item 2720-001-0044 by $3.3 million.)

Chapter 1586, Statutes of 1988 (AB 2706, Katz), established the Biennial Inspection of Terminals (BIT) program. Under the program, all motor carrier (truck) operators are required to have their truck “terminals” inspected by CHP every 25 months to ensure that the operator is in compliance with state laws and regulations designed to promote highway safety. A terminal is the location where the vehicles are garaged and maintained. According to CHP, as of July 2006 about 68,000 terminals had enrolled in the program. These terminals range in size from one truck (owner-operator) to more than 100 trucks.

During the inspection, CHP inspectors (nonuniformed staff) check the physical condition of a sample of the trucks and trailers in a given terminal, as well as review the maintenance and driver records (including vehicle inspection reports, repair records, and time cards for drivers) for compliance with state laws and regulations. Terminals that pass inspection are issued a safety compliance report, while those that fail are required to be reinspected every 120 days until safety compliance is achieved.

Operators enrolled in the program are required to pay a fee for each terminal inspection. For terminals with one truck and up to three trailers, operators pay $400 for the initial inspection, and $100 for subsequent inspections. For larger terminals, with two or more trucks and four or more trailers, operators pay $650 for the first inspection, and $400 for subsequent inspections. Fee revenues are deposited into MVA for support of the BIT program, as well as roadside safety inspections.

Budget Proposes to Expand Inspections and Increase Fees. The Governor’s budget requests an increase of $7.7 million and 71.5 positions to enable CHP to double its terminal inspections from about 18,000 to 37,000 annually. The proposal represents a 69 percent increase over estimated current-year spending, and a 48 percent increase in staffing. The administration also proposes legislation to implement a new fee structure to increase funding for the program. The proposed fee would be based on terminal size and the same amount would be levied for initial and subsequent inspections. The CHP estimates the proposed fees would generate approximately $20 million in 2007-08, which is about $12 million more than is generated currently.

Idea Has Merit, but Proposal Is Flawed. We think the overall goal of the budget request has merit. The department currently inspects only about one-half of the terminals required to be inspected in a given year. By doubling the number of inspections, CHP will be able to ensure that a greater number of terminals are compliant with traffic safety laws, thereby improving highway safety. Moreover, the higher fees would eventually bring the program’s revenues more in line with its expenditures. The BIT program was designed to be self-funded, so the proposed fee increase is consistent with the Legislature’s intent when the program was established in 1988.

However, the actual proposal is flawed. Specifically, our analysis finds that the proposed fee structure lacks rationale, and is unlikely to generate $20 million in 2007-08. Moreover, many of the positions are not justified on a workload basis. We discuss these issues in greater detail below.

Proposed Fee Schedule Charges Small Operators More Than Large Operators. The BIT inspections of larger terminals involve more work and take longer to complete than the inspections of smaller terminals. This is because there are more trucks, more drivers, and more maintenance records to inspect in the larger terminals. Yet, as Figure 1 shows, the proposed fee schedule would charge the small terminals more on a per vehicle basis than the large terminals. For example, under the Governor’s proposal, the operator of a terminal with two trucks would be required to pay $400, or $200 per truck inspected, whereas the operator of a terminal with 100 trucks would pay $1,600, or $80 per truck inspected.

Figure 1

Proposed Fee Charges Small Operators
More Than Large Operators

Terminal
Fleet Size

Required Number of
Vehicles to Inspecta

Governor's
Proposed Fee

Cost
Per Vehicle Inspected

1 or 2

All

$400

$200‑400

3 to 8

3

650

217

9 to 15

4

800

200

16 to 25

6

1,000

167

26 to 50

9

1,200

133

51 to 90

14

1,400

100

91 or more

20

1,600

80

aStatute requires this number of
vehicles to be inspected. Administration does not propose to change
this.

BIT Program Unlikely to Generate Projected Revenue. The CHP’s revenue estimate assumes that all terminals inspected during 2007-08 will pay the higher fee. However, the program allows carriers to pay the inspection fee up to nine months, but not later than seven months, prior to the expiration of their BIT certification period or “inspection term.” This means that the fees for over one-half of the terminals that are due for inspection in 2007-08 will have been paid by the time the higher fee becomes effective. Given the potential fiscal impact of the new fee on individual companies, it is reasonable to expect that many will pay the fee at the earliest possible date, rather than wait until the fee increases. For this reason, we think at best, $6 million in additional revenues would be generated in 2007-08 with the new fees, rather than the $12 million projected by CHP.

Positions Not Fully Justified. Our review shows that the staffing request is not justified in two areas. First, in calculating the number of inspector positions needed to conduct the proposed 37,000 BIT inspections in 2007-08, CHP included workload associated with the inspection of bus terminals, which is not part of the BIT program. In addition, CHP assumed that all truck terminals require approximately eight and a half hours to complete when, in fact, about 25 percent of the terminal inspections in a given year are subject to an “administrative review” which takes approximately two hours. After adjusting for these factors, our analysis shows that only 33 of the 60 inspector positions (30 Motor Carrier Specialist I and 3 Motor Carrier Specialist II positions) are justified on a workload basis. Figure 2 shows a summary of our estimates compared to the department’s request.

Figure 2

CHP BIT Position Request Versus LAO Recommendation

(Dollars in Millions)

Number of Positions

Classification

CHP
Request

LAO
Recommendation

Savings

Motor Carrier Specialist I

55.0

30.0

$2.8

Motor Carrier Specialist II

5.0

3.0

0.3

Office Technician

10.5

5.5

0.2

Accounting Technician

1.0

1.0

—

Totals

71.5

39.5

$3.3

CHP=California
Highway Patrol; BIT=Biennial Inspection of Terminals.

Second, the request for 10.5 office technicians is not substantiated. While we think an augmentation of office technicians is reasonable given the additional inspections that would be completed if the request is approved, the department provided no workload analysis or other information to justify these positions. As such, we recommend that the Legislature reduce from 10.5 to 5.5 the number of office technicians. This would increase the level of support staff commensurate with the proposed increase in annual inspections.

Overall, we recommend the Legislature reject on a workload basis 32 of the 71.5 positions requested by CHP for savings of $3.3 million.

“Backlog” of Inspections Would Continue. In 2006-07, CHP is on track to inspect about one-half of the terminals due for inspection. This leaves a backlog of about 18,000 terminals yet to be inspected. The administration is not proposing to eliminate the backlog in the budget year. However, the proposed higher level of inspections would gradually reduce its size. We support this approach for a couple of reasons. First, as we noted, only a limited amount of the projected revenues from the proposed fee structure are likely to materialize in the budget year. Therefore, adding the staff required to address the backlog immediately would likely increase the program’s expenditures above its revenues, thus drawing MVA monies away from other programs. Second, the proposed doubling (a 100 percent increase) of the number of BIT inspections represents a significant expansion in a single year. Based on discussions with CHP, it appears there may be a limit to the department’s capacity to hire, train, and house the increase in staff all in one year.

Lastly, there are other potential strategies for addressing the backlog. One potential approach would be for CHP and the industry to explore and identify strategies that can be employed to reduce the average time required to complete an inspection. As another example, under current law, the CHP commissioner has the authority to extend a terminal’s safety compliance period. This authority could be used to, in effect, allow certain operators in the backlog to maintain compliance until their next scheduled BIT inspection. We recommend CHP advise the Legislature on potential operational efficiencies that can be implemented to reduce the time required for a BIT inspection.

For 2007-08, the department requests $17.5 million to hire an additional 120 road patrol officers, as well as 41 nonuniform staff to support the officers. While the staffing augmentation is warranted, the requested funding is too high in three areas: cadet overtime, general expenses, and vehicle operations. Accordingly, we recommend a reduction of $1.1 million due to overbudgeting. (Reduce Item 2720-001-0044 by $1.1 million.)

Most traffic accidents and fatalities occur because individuals are not observing the traffic safety laws. The primary responsibility of the patrol officer is to conduct “proactive patrols,” which serve both as a deterrent to drivers who might otherwise drive unsafely, as well as a tool to enforce the law by issuing citations and/or arresting individuals found in violation of traffic laws designed to promote highway safety. To the extent that proactive patrols prevent drivers from breaking these laws on California’s highways, accidents may be prevented and lives may be saved.

Governor’s Budget. For 2007-08, the department requests $17.5 million to provide partial-year funding for 120 additional road patrol officers and full-year funding for 41 nonuniformed staff, for a total of 161 additional staff. This is the second consecutive year of major increases of patrol officers. As part of the 2006-07 Budget Act, the Legislature approved funding for 240 road patrol officers and a complement of 70 support staff. The CHP has indicated that its goal is to increase the number of hours that CHP officers spend on proactive road patrol. The additional staff furthers that goal.

Request Is Overbudgeted. We recommend approval of the 161 positions. As we noted last year, some of CHP’s divisions have experienced large increases in vehicle registrations and highway travel. In addition, vehicle collisions in some divisions have far outpaced officer hiring between 2000 and 2005. However, our review indicates the request is overbudgeted in three areas: cadet overtime, general expense, and vehicle operations. We discuss each of these areas below.

Cadet Overtime. The new Bargaining Unit 5 (BU 5) contract provides that while at the CHP training academy, cadets may earn a total of 152 hours of overtime, with the first 103 hours compensated with compensatory time off at time and a half, and the remainder (49 hours) paid at the hourly overtime rate. Instead, CHP’s request would provide salary payment for the entire 152 hours of cadet overtime. Additionally, in calculating the overtime costs for these positions once they become officers, CHP used an overtime rate that is based on pay for all officers (including more senior officers) and sergeants instead of using an overtime rate that is based on the midstep pay for newly-minted officers. We find no justification for using a higher overtime pay rate than that provided for in the BU 5 contract. Based on our calculations, we recommend reducing the $1.3 million requested for overtime to $686,500, for savings of $569,000.

General Expense. The general expense category includes funds for a variety of items ranging from paper clips to guns. For the 161 positions, the department has requested $1.5 million to cover general expenses. We identified a technical error that resulted in the department requesting about $200,000 more than needed in 2007-08. The department concurs with this finding. We therefore recommend a reduction of $200,000.

Vehicle Operations. For the 48 vehicles proposed to be purchased for the new officers, the department has also requested $615,000 for operating expenses, about $12,200 per vehicle, mostly for gasoline. The department, however, did not adjust the request to reflect the fact that the new officers will spend much of the coming year in the cadet training academy and will not require a patrol vehicle during that time. We recommend a reduction of $350,000 to account for the period of time that the officers will not be driving the vehicles. Based on information provided by the department, the remaining $265,000 should cover gasoline and other costs for the period the vehicles are in operation.

We recommend a reduction of $19.8 million in overtime funding for the California Highway Patrol because the funds are no longer needed for tactical alerts. We further recommend the adoption of budget bill language requiring that any unused portion of the $5 million provided for tactical alerts revert to the Motor Vehicle Account. (Reduce Item 2720-001-0044 by $19.8 million.)

Following the terrorist attacks of September 11, 2001, CHP officers were placed on 12-hour shifts, or “tactical alerts,” to enhance preparedness and provide an immediate increase in the level of security services. In 2002-03, the Legislature provided CHP $32.5 million to continue the tactical alerts and adopted budget bill language requiring that any unused funds revert to MVA. The budget bill language was not included in 2003-04, but the department retained most of the funding.

According to CHP, in 2003-04, the $32.5 million for tactical alerts was reduced to $24.8 million by the Department of Finance through a baseline reduction ($5.9 million) and a redirection ($1.8 million) to cover workers’ compensation costs. However, at the time this analysis was prepared, the department had not provided documents showing these adjustments.

Data provided by the department do not justify retaining the full $24.8 million in its 2007-08 budget. Specifically, CHP data show that in 2002-03 it only used 149,000 overtime hours for tactical alerts at a cost of $17.4 million; and, in 2003-04 it used 71,000 hours and $3.2 million for tactical alerts. The department reports that after 2003-04 it stopped tracking hours and costs for tactical alerts.

Based on this information, we recommend a reduction of $19.8 million in CHP’s overtime funding for 2007-08. We are not recommending a reduction of the full amount, as the department may be required at some time during the budget year to resume the tactical alerts. Based on the amount spent in 2003-04 (the most recent year for which data are available), we think the remaining $5 million is a reasonable set-aside in the event tactical alerts are needed in 2007-08.

In order to improve legislative oversight of this funding, we further recommend that the Legislature adopt the following budget bill language requiring that unused funds revert to MVA. This means CHP will need to reinstate tracking of its use of tactical alerts.

Item 2720-001-0044. Of the funds appropriated in this item, the amount of $5 million is allocated for security tactical alerts. If the amount used for tactical alerts is less than $5 million, the remainder of the sum shall revert to the Motor Vehicle Account.

The budget requests $51 million for the second-year funding of a multiyear project to replace and upgrade the California Highway Patrol’s radio system. We withhold recommendation on the request pending receipt and review of a March report on the project’s status.

In 2006-07, the Legislature provided $57 million for the first stage of a multiyear project to replace and upgrade CHP’s radio communication system. The CHP estimates the project will cost more than $500 million when completed. The Legislature also adopted budget bill language requiring CHP to report annually in March on the status of the project. Specifically, the department is required at a minimum to report on any revised costs, changes in project scope, and adverse effects on interoperability caused by new technology being used by local governments or state agencies.

The budget requests an additional $51 million for the second year of the radio replacement project, bringing the total 2007-08 appropriation to $108 million. Prior to receipt of the report, there is little information upon which to determine if the funds requested are reasonable and consistent with CHP’s current schedule and costs. We therefore withhold recommendation on the request pending receipt and review of the required report. The report will allow the Legislature to determine if the project is on schedule and budget before committing the additional funds.